International Agreements and Cooperation Theory: Interaction with International Trade

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Submitted by Andrew Kenny on Fri, 08/27/2010 - 16:00

International climate agreements do not take place in isolation, but rather must adapt to existing international norms and legal frameworks. Perhaps the most significant of these is the international trade regime. The World Trade Organization and the numerous bilateral and multilateral trade agreements that exist between different nations are often seen as a potential obstacle to an international climate agreement. Whether and to what extent trade rules prohibit the use of certain policies (government subsidies to domestic industries for clean technology, for example) is thus a key issue in this context.

In contrast, trade rules might instead be adapted to become a proactive part of an international climate agreement. Trade sanctions could be levied against countries that fail to meet emission reduction targets. In this way, an agreement could leverage the power of a legitimate enforcement mechanism (as the WTO does already) to induce compliance with environmental goals. However, the effectiveness of trade sanctions as an enforcement mechanism is sometimes questioned (as it is in the WTO context, as well).

Trade rules are also potentially one of the best ways to prevent carbon leakage. Especially for countries with significant exports and imports, the threat of retaliatory tariffs or other trade sanctions against trading partners who fail to curb carbon emissions might be the most effective unilateral means of discouraging carbon leakage. If powerful regional coalitions embrace these rules, then the threat becomes even stronger. The most important issues are the trade linkages between various countries and their flexibility.

Other issues in the international trade context include: (1) the extent to which the WTO or another supranational authority can and should be a part of the international environmental regime; (2) the effectiveness of green tariffs and other protective measures, and their reputational effects; (3) how developing countries fit into the existing global trade regime, and the manner in which their stances on climate change affect the viability of further trade agreements; and other issues.